AGUAS ANDINAS A successful experience in a regulated market
February 2016 01 CHILEAN SANITATION SECTOR WATER & SEWERAGE INDUSTRY IN CHILE XV y I Region / Iquique Aguas Del Altiplano An example of a successful public-private alliance
II Region / Antofagasta Aguas De Antofagasta
III Region / Copiapó Aguas De Chañar
IV Region / La Serena Aguas Del Valle TWO CONCESSION MODELS 1998 BEGINNING V Region / Valparaíso OF THE Indefinite concession Esval R.M. / Santiago VI Region / Rancagua Aguas Andinas PRIVATIZATION Essel Concession for 30 years VII Region / Talca PROCESS Aguas Nuevo Sur VIII Region / Concepción Essbio IX Region / Temuco Clients breakdown by Economic Group Aguas Araucania Los Ríos / Valdivia X Region de Los Lagos y XIV Region AGBAR SUEZ 43.0% Aguas Décima de Los Ríos / Pto.Montt ONTARIO TEACHERS PP 31.1% Essal Private companies: 6 MARUBENI 9.2% Xi Region / Coyhaique INV. AGUAS RIO CLARO 5.1% Aguas Patagonia 30 years Concessions: 8 SMAPA 3.9% EPM 3.3% 96% OF CLIENTS served by a HIDROSAN-ICAFAL-VECTA 2.6% privately-held operator OTHERS 1.9% Xii Region / Pta.Arenas Aguas Magallanes
Source: SISS' 2014 Management Report 3 EVOLUTION OF WATER & SEWERAGE INDUSTRY Rising levels of investment to increase coverage and quality
TODAY 100% drinking water coverage 1999 97% sewerage coverage 99% drinking water coverage 100% waste water treatment coverage 92% sewerage coverage 23% waste water treatment coverage USD 4,200 MM Investment in drinking water, sewerage, and waste water treatment (2002-2013)
4 CHILE IN COMPARISON TO THE WORLD The first Latin-American country with 100% waste water treatment …at the highest international standards 100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Source: OECD, Environmental Statistics, Treatment of Waste Water. 5 CHILE IN COMPARISON TO THE WORLD Efficient tariffs, one of the lowest in the OECD TARIFFS (Drinking Water, sewerage, and Waste Water Treatment US$/m3)
OSLO 7,09
BERLIN 6,6
SYDNEY 5,93
COPENHAGEN 5,33 EFFICIENT TARIFFS
OTTOWA 5,12 The lowest of the
PARIS 3,88 capitals of countries
LONDON 3,65 member of the Including 100% MEXICO CITY 3,23 OECD COVERAGE OF WASHINGTON 2,74 DRINKING WATER & MADRID 2,56 WASTE WATER STOCKHOLM 2,33 TREATMENT ATHENS 1,62
SANTIAGO 1,39 ROME 1,36 And with SELF-FINANCED SEOUL 1,24 companies
6 FOCUS: CHILEAN SANITATION REGULATORY FRAMEWORK HIGHLY REGULATED SANITATION INDUSTRY Proven, Stable, and Transparent Framework
Regulatory framework in place for more than 25 years MODEL COMPANY vs. REAL COMPANY
Superintendence of Sanitation Services (SISS) acts as the regulator counterpart in MODEL COMPANY AGUAS ANDINAS the tariff setting process, which lasts for 1 year approximately Greenfield operation Existing infrastructure
Tariffs are reset every five years, based on an unbiased and technical model: Combination of new and Latest technology – Based on the long term total cost of a model company existing technologies – Discrepancies are solved by an independent experts committee – Minimum real return on assets of 7% after taxes Cost efficiency Real costs – Automatic interim adjustments linked to polynomials based on CPI and WPI 100% coverage in all services indexes Real coverage
Self-financing of investments Self-financing of investments Government subsidies for low-income clients through tariffs through tariffs
Ability to use debt to finance Minimum Capex and enhance return on The regulatory framework of the Chilean water industry has been fundamental to Return on Assets equity the development of the sector
8 PRINCIPLES OF THE TARIFF MODEL Ensuring the self-financing of an efficient company
Regulatory framework is established by The tariff model aims to simulate a law and applies to all companies in the competitive market. industry. Public negotiation process.
TRANSPARENCY EFFICIENCY
SELF-FINANCING EQUALITY Revenues cover the costs of the The same tariff is applied to all efficient Model Company. customers (regardless whether they are industrial or residential, etc.). Direct subsidies provided to low-income customers.
9 STAGES OF THE TARIFF NEGOTIATION PROCESS From general parameters to the negotiation of the size of the model company SISS OFFER Publication of the Tariff Setting Process Parameters and Methodology
Aguas Andinas provides information about the Real Company to the SISS
SISS analyses the Aguas Andinas analyses the Model Company Model Company Aguas Andinas highlights discrepancies
Negotiation
Agreement? No Yes Expert Committee
Committee Decision Tariff Decree
10 ESSAL TARIFF-SETTING PROCESS Technical and Negotiation Process For One Year
Agreed list of candidates Definitive for the Bases Expert Committee
Parameters and Committee SISS Comments on SISS calls Methodology SISS answers Background Exchange of The company gives sets new Tariffs the Committee Publication to the Comments delivery of the the Tariff highlights its Tariff Expiration parameters of Experts Tariff Study Studies Discrepancies answer Formulas are made Process
JUNE AUGUST SEPTEMBER OCTOBER MARCH APRIL APRIL JUNE AUGUST SEPTEMBER 12 2015 11 2015 25 2015 29 2015 8 2016 7 2016 26 2016 5 2016 12 2016 11 2016
30 days 16 days 30 days 30 days
11 AGUAS ANDINAS’ EXPERIENCE IN CHILE AGUAS ANDINAS Chile’s Largest Sanitation Company TARIFFS (Potable Water, Sewerage, and Sewage Treatment US$/m3) Coyhaique 3,17 Antofagasta 2,94 Copiapó 2,69 2.145.122 clients Iquique 2,38 100% coverage in Representing 43% Punta Arenas 2,30 potable water and sewage of the clients in the Puerto Montt 2,26 treatment industry Arica 2,05 Valparaíso 2,02 Temuco 1,95 Valdivia 1,95 Talca 1,92 La Serena 50.5% of potable 1,90 Rancagua 1,64 water billed in the One of the lowest tariffs in Chile Concepción 1,55 industry Gran Santiago 1,34 Maipú 1,06 Tariffs as of December 2014 considering US $1= $607.38
Source: SISS' 2014 Management Report 13 INTEGRAL WATER CYCLE MANAGEMENT 100% Coverage of Potable Water, Sewerage, and Sewage Treatment
Ground and Surface Network of 15,218 Returning 100% sources kilometers
Network of 12,348 100% of coverage 100% Sewage Treatment kilometers
Source: SISS' 2014 Management Report and Aguas Andinas 14 AGUAS ANDINAS’ INVESTMENTS Long-term commitment with the integrated Total investment water cycle in Chile since acquisition Beginning of Aguas Andinas acquires Beginning of operation of the MM USD 2,400 Aguas Cordillera & Aguas operation of the Curacaví and Manquehue. Farfana Treatment Talagante Treatment Plants. Plant. “Clean Urban Mapocho” Aguas Quinta Collector is inaugurated. (1996-2000)
POPUL. ACCESS TO IMPROVED 180,000 5,500,000 7,100,000 POBLACIÓNSANITATION SANEADA 1994 1995 1999 2000 2001 2003 2004 2005 2008 2010 2012 2013 SANITATION COVERAGE 3% 23% 69% 87% 100%
Aguas Acquisition of the 53.5% Beginning of operation Décima Acquisiton of Aguas Beginning of operation Beginning of of the Mapocho Waste (1994-2006) Andinas. operation of the of Empresa de Servicios Water Treatment Plant. of the El Trebal Sanitarios de Los Lagos Treament Plant. The Valdivia de Paine construction of the and El Monte 100% sanitation of Farfana plant begins. Treatment Plants. the Metropolitan Region
15 EFICIENCIA Y GARANTÍA DEL SERVICIO Trabajo constante para continuar mejorando los estándares
Company’s world class positioning in Health and REDUCTION by Safety standards Implementation of arsenic abatement ~35% of the “10 Rules that Save INCREASE IN AUTONOMY of treatments annual Lives” the potable water distribution ruptures/km rates system for 9 hours for when in 6 years there is an emergency that does not allow for the RUPTURE RATES (RUP./KM.YEAR) production of water 0,200 0,190 0,20 0,180 0,185 0,162 0,148 VALUATION OF RESIDUES IN 0,131 WASTEWATER TREATMENT PLANTS: • Water suitable for all types of 0,10 irrigation • Bio-methane at the Farfana Plant • Bio-solids 0,00 • Biodiesel (R&D 2008 2009 2010 2011 2012 2013 2014
16 AGUAS ANDINAS’ SUSTAINABILITY Sustainability efforts linked with the Company’s stakeholders
Human Clients Shareholders Capital
Profitability; investment stability; risk Career development and training; equal Quality and continuity of supply; customer management; transparent management opportunities; good labor conditions and service, service channels and complaints communication; health and safety management; transparency and accuracy in billing
Neighboring Suppliers & Authorities Communities contractors
Impact management; dialogue and Legal Compliance; collaborative relationships; local development Transparent and equal conditions; timely relationships; contribution to local opportunities payments; development opportunities development
17 CHALLENGES VOCATION FOR SERVICE & CLIENT FIRST ATTITUDE Nearby, visible, and exceeding expectations Honour the trust of ENSURING CONTINUITY BY our consumers MANAGING NEW VARIABLES Geographic and demographic growth of the city Sustained annual increase over 2% in the number of clients in recent years
Effects of climate change Investing in SAFETY & Longer periods of drought, the QUALITY OF SERVICE occurrence of convective rainfall & the extreme turbidity of the Maipo River 19 Managing resources sustainably Hydraulic Efficiency Plan to reduce losses and Energy Efficiency Plan
TAKING CARE OF FRESHWATER SOURCES Innovation and technology to protect freshwater sources and to monitor the glaciers in the Maipo River basin
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